The price of movie tickets increases by 10% and the demand for movie tickets falls by 12.5%. The price elasticity of demand for movie tickets is:
A) perfectly inelastic
B) elastic
C) inelastic
D) perfectly elastic

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is -12.5% / 10% = -1.25, which is greater than 1 in absolute value, indicating that the demand is elastic.

The Price of Movie Tickets Increases by 10% and the Demand